Regulators and politicians who want to curb the huge bonuses paid to financiers in the wake of the global credit crisis may find the banking sector's response even more unpalatable.

More money for the highest flyers and less for the rest.

Investment banks that have survived the crisis have had a bumper start to 2009, which could put bonuses on the rise again even while banks, recruiters and compensation experts cast around for other ways to motivate the money makers.

Compensation consultant Johnson Associates Inc has already predicted bonuses may rise 20 percent to 30 percent in some areas of investment banking this year.

A few banks are actively hiring and offering staff juicy packages which can include guaranteed bonuses.

So attempts to regulate bonuses or keep a lid on them could struggle as the financial services industry picks itself up and moves on.

The multimillion dollar bonus culture of investment banks has been blamed for contributing to the risky behavior which brought about the near-collapse of the world financial system.

Britain's finance watchdog said in March: Although it is hard to prove a direct causal link, there is widespread consensus that remuneration practices may have been a contributory factor to the market crisis.

The Financial Services Authority said pay schemes in the industry motivated staff to pursue unduly risky practices.

But recruitment experts say, if you are looking at ways to reward star bankers or traders there are few alternatives.

I haven't seen anything creative yet in terms of companies trying to remunerate people in non-monetary ways, said Frank Hollmeyer, a partner and head of the asset management practice at executive search firm Heidrick & Struggles.

RAINMAKERS

Bankers have been vilified as greedy and self-serving and the word bonus has become synonymous with excess. But a bonus as a reward for success and hard work is considered fundamental to the workplace.

Bonuses are a necessary part of a reward system, said Michael Armstrong, consultant and author of Handbook of Employee Reward Management and Practice.

I see the bonus as a reward, a recognition of achievement. I don't believe it is an incentive. If it acts as an incentive it could provide the wrong incentive.

In banking, job satisfaction, intellectual challenge and sense of achievement can play a part, but the main motivation is money, which traditionally helped to compensate for long hours, cut-throat competition and risk-taking.

Some change is inevitable after the crisis, which forced governments to bail out some of the world's biggest banks.

Top performing bankers - so-called rainmakers - who earn mega-bucks for their employers - will still get big bonuses, although maybe not as lavish as during the last bull market because investment banks now have less money to play with.

We don't see that the bonus culture will go away, said Linda Quaranto, director human capital, Deloitte Consulting LLP.

What will change long-term is that the bonuses will still be a big component of total compensation, but fewer people will get these bonuses because of more checks and balances.

CUT OFF YOUR COAT-TAILS

Bonuses for high fliers are also expected to contain a bigger portion of deferred elements, including equity, as a long-term incentive to help counter accusations that the industry is fundamentally geared toward a short-term view.

It is the rank and file investment bankers and traders as well as support staff -- so-called non-revenue producers -- who are likely to feel the biggest impact.

In an investment bank, teams working with star bankers often shared in the spoils from the big deals.

The days of these 'coat-tailers' are gone, one senior investment bank executive said.

Banks may pay some of their junior bankers higher base salaries to make up for lower bonuses if they want to keep them.

But for others further down the pecking order, non-financial incentives will be needed.

The disparity in compensation will be bigger between the top and the average people, Hollmeyer said.

A Deloitte study into financial services compensation highlighted that there will be a heightened perception of excessive bonuses for jobs in financial services that are very similar to jobs in other sectors.

So support staff, for example, are likely to get smaller bonuses than in the past, which could trigger defections from the 24/7 financial services industry to a less pressured area.

There is recognition that there is a need to increase non-monetary incentives, said Quaranto. Especially for 'non-revenue' producers.

One option could be greater emphasis on work/life balance. Quaranto said professional services firms, for example, already had a lot of flexibility in terms of working patterns and other possibilities could be childcare facilities, subsidies for childcare, increased vacation time.

But this will not suit everyone.

Some people just want cash in their pocket, the senior investment bank executive said.

(Reporting by Jane Merriman, editing by Paul Casciato)

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